The clients we collaborated with to develop the pricing insights told us that they particularly valued:

Transcription

1 JAPAN SALES, VOLUME, PRICING 2015

2 March 2015 EvaluatePharma s Japan Sales, Volume, Pricing Intelligence The size of the Japanese pharmaceutical market and the favourable payer environment makes it a key market for commercialisation of any new drug. In response to client requests for insight into Japan drug pricing and the volume dynamic behind Japan drug sales, EvaluatePharma now includes: Japan regulatory approvals (PMDA); National Health Insurance (NHI) drug reimbursement prices; new drug price setting details, including price premiums achieved; and peak sales forecasts at launch. See the key features of this enhancement listed below. A comprehensive methodology document including in-depth documentation of the Japan datasets and use cases is available to all EvaluatePharma subscribers. This new content integrates with our existing reported annual and quarterly Japan drug product sales as well as with our USA Sales, Volume and Pricing and with the rest of the EvaluatePharma service. The clients we collaborated with to develop the pricing insights told us that they particularly valued: Insight into Japan unit drug pricing and cost per patient per year for assessments Efficiency in conducting international drug price comparisons Access to patient-based forecasts models for similar products launched in Japan Transparency on new drug pricing methodology and premiums achieved for peer products Integration of pricing information with other commercial and R&D intelligence Translation to overcome language barriers and eliminate difficult document searches Key features of this new intelligence include: Single, trusted source for Japan sales, pricing and product peak sales forecasts at launch Comprehensive Japan unit drug pricing including primary care and biotechnology products, branded and generics. Source: National Health Insurance (NHI) drug price list International price comparisons for Japan, USA, France, Germany and the United Kingdom Peak sales forecast at launch; including cost per patient calculation and number of patients treated Pricing Premiums achieved and methodology used to calculate initial reimbursement price All regulatory approvals from PMDA (Pharmaceutical and Medical Devices Agency) To find out more about our USA and Japan Sales, Volume and Pricing, future pricing developments and Evaluate s full range of services contact us: North America: Debbie Paul Tel: debbie.paul@evaluategroup.com Rest of the World: Will Hau Tel: +44 (0) will.hau@evaluategroup.com Disclaimer Japan: Hiroshi Yamazaki Tel: + 81 (0) hiroshi.yamazaki@evaluategroup.com For general questions: Christine Lindgren Tel: christine.lindgren@evaluategroup.com All intellectual property rights in this report remain that of Evaluate Ltd and/or its respective third party licensors. Whilst all reasonable steps have been taken to ensure that the data presented are accurate, Evaluate Ltd cannot accept responsibility for errors or omissions. Neither does Evaluate Ltd warrant the accuracy, merchantability or fitness for a particular purpose of the data. Nothing in the reports shall constitute investment, financial or legal advice and the contents of the reports are provided for information purposes only. The data is not intended to amount to advice and should not be used as a determining factor in any investment decision. This report may not be lent, resold, hired out or otherwise disposed of by way of trade in any form of binding or cover other than that in which it is published, without the prior written consent of Evaluate Ltd. 2

3 March 2015 EvaluatePharma Foreword: Why Japan is a Key Strategic Market Japan is the second largest prescription drug market after the USA, with government reimbursed purchases growing 5.9%, in local currency, to around $60bn ( 7,038bn) in fiscal The Japanese Yen has experienced a near 30% depreciation since the start of aggressive monetary expansion in December This has hit the dollar reporting of sales by Big Pharma. Despite this, Japan remains a core strategic country for large and medium sized pharmaceutical and biotech companies due to its favourable reimbursement environment. Favourable Reimbursement Environment of the Japanese Market The primary payer for drugs in Japan is the government. In order for hospitals and pharmacies to get reimbursed, a drug with its associated price must be listed on the National Health Insurance (NHI) list. This is achieved by getting the Pharmaceutical and Medical Devices Agency (PMDA) to approve a drug for marketing in Japan. Upon approval, a manufacturer can request a new reimbursement drug price from the Drug Pricing Organisation (DPO) and once a reimbursement price has been agreed between the DPO and the manufacturer the drug can be added to the NHI coverage list. The median number of days between approval and NHI reimbursement is 60 days. Getting the Right Price at Launch is Critical; Rewards for Innovation The DPO sets the reimbursed price in Japan and offers price premiums for innovation. Given that the reimbursed price of a drug is essentially fixed at launch, it is vitally important that drug companies achieve the optimal price at launch. Within this report, we explore the two pricing methods: Cost Calculation (when no comparator drug is available) and Similar Efficacy Comparison Method (page 15+). In addition, we look at the largest premiums awarded since 2006 (page 17), and show that Bristol-Myers Squibb/ Ono s melanoma treatment, Opdivo, tops the list within the Cost Calculation Method. Price Adjustment Every Two Years: April 2014 Prices Reduced by 4.2% Every two years, effective on 1st April, the MHLW (Ministry of Health, Labour and Welfare) undertakes a price revision of drugs on the NHI coverage list. The primary purpose of this revision is to reduce the gap between the reimbursement price and the actual price paid by purchasers (hospitals/ pharmacies). On page 13 we have calculated the April 2014 revision at -4.2%. We can also see that biotechnology products had a price cut of 2.5% versus a price reduction of 5.2% for small molecule products. This is due to the reduced discounting on biotechnology products versus small molecule and also the reduced impact of patent expiries on biotechnology products versus small molecules. Peak Sales Potential of Newly Reimbursed Drugs Surges to $34bn in When applying for drug reimbursement, companies are required to submit a peak sales forecast, including the number of patients treated. Analysis on page 7 reveals drugs with a collective $34bn of potential peak sales received reimbursement post 2010 versus $16.9bn for the period This illustrates that the Japanese market is set for a period of sustained growth. New Endocrine (Diabetes) & Central Nervous System Drugs Largest Therapy Area for Growth On reviewing the therapeutic split of the collective $34bn in peak sales (page 8) of newly reimbursed drugs in , we identify endocrine (diabetes) as the leading therapeutic area with $6.1bn in peak sales potential. This is driven by a raft of new treatment options available (including SGLT2, GLP-1 & DPP-IV) to Japan s large treated diabetic population (~7 million patients). Central nervous system (CNS) is second with projected peak sales of $5.3bn. 3

4 EvaluatePharma Foreword The fact that oncology only ranks 6th, in peak sales forecasts, despite having the second highest number of drugs reimbursed for , and endocrine and CNS are ranking one and two, highlights the epidemiological differences between Japan and the other G7 countries. Japan Drug Prices % Cheaper than USA The process for receiving a reimbursed drug price requires a company to submit comparable unit prices for the key markets of USA, Germany, UK and France. On page 15 we have analysed all the price comparison data and can reveal that between , the median reimbursed price for drugs in Japan was % below reference price in the USA. In addition, we show that median drug prices in Japan are 20% lower than in Germany, 28% higher than in the UK and 11% higher than in France. Anthony Raeside Head of Research, Evaluate Ltd 4

5 Key Highlights Japan Sales, Volume, Pricing Report Peak Sales Forecast of Newly Reimbursed Drugs Surges to $34bn in Versus $16.9bn in Quantity of Reimbursed Drugs Increases 8% to 64 in 2014 vs. 2013; 2014 Peak Sales Forecast Increases 19% to $6.3bn New Endocrine Drugs Have Highest Peak Sales Forecast; Central Nervous System Second Median Annual Cost of New Drugs in Japan Jumps to $837 ( 98k) in , From $697 ( 82k) in New Drugs Cost More Than $100,000 ( 11.7m+) per Year in New Cancer Treatments Giotrif & Zytiga Priced at Premium Versus Other Newly Reimbursed Drugs in 2014 Japan Reimbursed Prices of Small Molecule Drugs (-5.2%) Falls Twice as Fast as Biologicals (-2.5%) in 2014 Revision Prices of Top 10 Selling Japanese Drugs Declined 19% Over the Last Four NHI Price Revisions ( ) Japan Reimbursed Drug Prices % Lower than USA; 20% Cheaper than Germany Cost Calculation Used in 21% of New Drug Package Reimbursements in 2014; Similar Efficacy Used in 79% Opdivo Earns 60% Adjustment for Novelty, Efficacy and Safety in 2014 Daklinza Achieves Highest Price Premium in 2014 of % 5

6 Table of Contents 7 Japan Drug Reimbursement Analysis (Peak Sales & Count): 2005 to Japan Drug Reimbursement Analysis ( ): By Therapy Area 10 Japan Drug Reimbursement Analysis (2014): By Company 11 Reimbursed Cost per Patient per Year Analysis ( vs ) 12 Japan Reimbursed Cost per Patient vs. No. of Patients Treated (2014) 13 Japan NHI Drug Price Revisions ( ): Total, Small Molecule & Biotech 14 Japan NHI Drug Price Revisions ( ): Top 10 Product Analysis 15 Price Comparision: Japan vs. Key International Markets 16 Japan Process for Pricing New Drugs 17 Distribution of New Drug Pricing Methods ( ) 18 Cost Calculation Method & Price Adjustment Analysis ( ) 20 Similar Efficacy Comparison Method Price Premiums ( ) 6

7 Japan Drug Reimbursement Analysis (Peak Sales & Count): 2005 to 2014 Japan Drug Reimbursement Analysis (Peak Sales & Count): 2005 to 2014 Peak Sales Forecast of Newly Reimbursed Drugs Surges to $34bn in Versus $16.9bn in Quantity of Reimbursed Drugs Increases 8% to 64 in 2014 vs. 2013; 2014 Peak Sales Forecast Increases 19% to $6.3bn EvaluatePharma finds that the overall output of the Japanese drug industry, measured by expected peak sales forecast of newly NHI reimbursed drugs, has dramatically increased from $16.9bn in to $34.0bn in In 2014, 64 newly reimbursed drugs had a peak sales forecast available, an 8% increase on The total value of peak sales forecast increased 19% from $5.3bn in 2013 to $6.3bn in reimbursed drugs were dominated by new SGLT2 inhibitors for type-2 diabetes, led by Astellas Pharma's Suglat, with a peak sales forecast of $515m. Japan Newly Reimbursed Drugs: Count vs. Peak Sales Forecast at Launch Source: EvaluatePharma (9 MAR 2015) Japan Peak Sales Forecast at Launch ($bn) Peak Sales: : $16.9bn : $34.0bn Number of Reimbursed Drugs with Peak Sales Japan Peak Sales ($bn) No. of Drugs with Peak Sales Japan Newly Reimbursed Drugs: Count of Number with Peak Sales vs. Total Japan Peak Sales Forecast ( ) Year (1 JAN - 31 DEC) No. of NHI Reimbursed Products New Active Ingredient % +38% +10% -22% +16% +3% +7% +22% +15% No. of Drugs with Peak Sales % Chg. +67% +5% +12% -13% +22% -2% -14% +% +8% Japan Peak Sales ( m) 156, ,216 2, , , , , , , ,468 % Chg. +147% +5% -16% +55% +54% -17% -42% +34% +28% Japan Peak Sales ($bn) % Chg. +129% +2% -4% +70% +64% -6% -43% +10% +19% Peak Sales ($bn): Peak Sales ($bn): 34.0 Top 10 Reimbursed Drugs in 2014: Ranked on Company Forecast Peak Sales Peak Sales No. of Product Company Filing Name ( m) ($m) Patients 1 Suglat Astellas Pharma 52, ,000 2 Farxiga Bristol-Myers Squibb 50, ,000 3 Canaglu Mitsubishi Tanabe Pharma 46, ,000 4 Zalutia Eli Lilly 42, ,000 5 Effient Daiichi Sankyo, ,000 6 Zytiga Johnson & Johnson 37, ,500 7 Deberza Kowa Company 34, ,000 8 Giotrif Boehringer Ingelheim 23, ,900 9 Lusefi Taisho Pharmaceutical Holdings 23, , Daklinza Bristol-Myers Squibb 22, ,000 Other 295,568 2,738 4,836,786 Total 666,468 6,320 9,548,186 Cost per Patient Per Year ( ) 66,000 65,789 63,889 44,021 74,074 4,933,333 64,151 3,362,319 63,889 1,305,882 Cost per Patient Per Year ($) $644 $646 $595 $430 $728 $45,921 $630 $32,816 $628 $12,156 Note: Where products are co-promoted, sales have been credited to the applicant company. Suglat: Astellas Pharma co-promotes in Japan with Merck & Co & Kotobuki Pharmaceutical. Farxiga: AstraZeneca co-promotes in Japan with Ono. 1 APR 2014: BMS completed divestment to AZ. Canaglu: Mitsubishi Tanabe Pharma co-promotes in Japan with Daiichi Sankyo. Zalutia: Eli Lilly copromotes in Japan with Nippon Shinyaku for erectile dysfunction & BPH indications. Zytiga: J&J co-promotes in Japan with AstraZeneca. Deberza: Kowa and Sanofi both applied for price reimbursement. Sales have been credited to Kowa. Lusefi: Taisho Pharmaceutical co-promotes in Japan with Novartis. 7

8 Japan Drug Reimbursement Analysis ( ): By Therapy Area Japan Drug Reimbursement Analysis ( ): By Therapy Area New Endocrine Drugs Have Highest Peak Sales Forecast; Central Nervous System Second EvaluatePharma finds that new endocrine (diabetes) drugs reimbursed between , had the highest peak sales forecast at over $6bn. Japan has a large treated diabetic population, around 7 million patients, and with a raft of new treatment options available (including DPP-IV, GLP-1 & SGLT2) this is clearly a growth hotspot for Japan. Central nervous system is second at $5.3bn, but with almost double the number of reimbursed drugs (52) versus endocrine (27). Surprisingly, oncology and immunodulators, which had the second highest number of drug reimbursements at in , only ranks 6th in terms of peak sales potential. This could to be due to the lower incidence of cancer in Japan versus other G7 countries and the resulting lower number of potential patients. Japan Peak Sales Forecast by Therapy Area: vs Source: EvaluatePharma (9 MAR 2015) Japan Peak Sales ($m) Endocrine Central Nervous Musculoskeletal Cardiovascular Blood Oncology & Respiratory Systemic Anti-infectives Gastro-Intestinal Sensory Organs Genito-Urinary Various Dermatology Peak Sales >$0m Nesina (DPP-IV) Suglat (SGLT2) Tenelia (DPP-IV) Farxiga (SGLT2) Canaglu (SGLT2) Tradjenta (DPP-IV) Central Nervous Oncology & Systemic Anti- Endocrine Musculoskeletal Blood Cardiovascular Respiratory Sensory Organs Various Gastro-Intestinal Genito-Urinary Dermatology Japan Reimbursed Drug Count by Therapy Area: vs Source: EvaluatePharma (9 MAR 2015) No. of NHI Reimbursed Drugs Forecast Peak Sales & Count of New NHI Reimbursed Drugs by Therapy Area: versus Peak Sales ( m) Peak Sales ($m) Drug Count Therapy Area % Chg Endocrine 95, , , % Central Nervous System 200, ,916 1,909 5, % Musculoskeletal 247, ,207 2,215 4, % Cardiovascular 364, ,700 3,539 4, % Blood 144, ,164 1,236 3, % Oncology & Immunomodulators 136, ,919 1,244 3, % 29 7 Respiratory 181, ,248 1,529 1, % Systemic Anti-infectives 161, ,550 1,724 1, % Gastro-Intestinal 74,617 97, , % Sensory Organs 27,320 95, , % Genito-Urinary 117,911 76,212 1, %

9 Endocrine Musculoskeletal Blood Cardiovascular Respiratory Sensory Organs Various Gastro-Intestinal Genito-Urinary Dermatology Japan Drug Reimbursement Analysis ( ): By Therapy Area Cont Forecast Peak Sales & Count of New NHI Reimbursed Drugs by Therapy Area: versus Peak Sales ( m) Peak Sales ($m) Drug Count Therapy Area % Chg Endocrine 95, , , % Central Nervous System 200, ,916 1,909 5, % Musculoskeletal 247, ,207 2,215 4, % Cardiovascular 364, ,700 3,539 4, % Blood 144, ,164 1,236 3, % Oncology & Immunomodulators 136, ,919 1,244 3, % 29 7 Respiratory 181, ,248 1,529 1, % Systemic Anti-infectives 161, ,550 1,724 1, % Gastro-Intestinal 74,617 97, , % Sensory Organs 27,320 95, , % Genito-Urinary 117,911 76,212 1, % Various 46,867 21, % Dermatology 6,270 8, % 3 2 Total 1,804,362 3,047,014 16,901 33, %

10 Japan Drug Reimbursement Analysis (2014): By Company Japan Drug Reimbursement Analysis (2014): By Company Bristol-Myers Squibb has Highest Potential Peak Sales of Newly Reimbursed Drugs in 2014 EvaluatePharma finds that Bristol-Myers Squibb's three new drug reimbursements in 2014 totalled $846m in peak sales potential. BMS's diabetes treatment Farxiga, later divested to AstraZeneca, accounted for almost $500m, with hepatitis C treatments Daklinza and Sunvepra also contributing to BMS taking the number 1 position in Japan in Daiichi Sankyo comes in second with $582m from blood products Effient and Lixiana. Mitsubishi Tanabe and Eli Lilly both launched one product in 2014 but each is worth over $0m in potential peak sales. Top 10 Companies in 2014: Ranked on Forecast Peak Sales for Newly Reimbursed Drugs Source: EvaluatePharma (9 MAR 2015) Peak Sales ($m) Peak Sales Forecast Count of Approvals Bristol-Myers Squibb Daiichi Sankyo Astellas Pharma Johnson & Johnson Mitsubishi Tanabe Pharma Eli Lilly Kowa Company Chugai Pharmaceutical GlaxoSmithKline Takeda Number of Reimbursed Drugs Top 10 Companies in 2014: Ranked on Company Forecast Peak Sales for Newly Reimbursed Drugs No. of Drugs Peak Sales Peak Sales Company Reimbursed ($m) ( m) 1 Bristol-Myers Squibb ,100 2 Daiichi Sankyo ,000 3 Astellas Pharma ,100 4 Johnson & Johnson ,9 5 Mitsubishi Tanabe Pharma ,000 6 Eli Lilly ,700 7 Kowa Company ,600 8 Chugai Pharmaceutical ,300 9 GlaxoSmithKline , Takeda ,268 Total of Top , ,708 Other 1, ,760 Total 64 6, ,468 Methodology: Company analysis is based on the applicant company. Peak sales, stated above, is the total of all peak sales for company's new drugs in Sales of products which are co-promoted have been credited to the applicant company. Key products in 2014 co-promoted include: Suglat: Astellas Pharma co-promotes in Japan with Merck & Co & Kotobuki Pharmaceutical. Farxiga: AstraZeneca co-promotes in Japan with Ono. 1 APR 2014: BMS completed divestment to AZ. Canaglu: Mitsubishi Tanabe Pharma co-promotes in Japan with Daiichi Sankyo. Zalutia: Eli Lilly co-promotes in Japan with Nippon Shinyaku for erectile dysfunction & BPH indications. Zytiga: J&J co-promotes in Japan with AstraZeneca. Deberza: Kowa and Sanofi both applied for price reimbursement. Sales have been credited to Kowa. Lusefi: Taisho Pharmaceutical co-promotes in Japan with Novartis. 10

11 Reimbursed Cost per Patient per Year Analysis ( vs ) Reimbursed Cost per Patient per Year Analysis ( vs ) Median Annual Cost of New Drugs in Japan Jumps to $837 ( 98k) in , From $697 ( 82k) in New Drugs Cost More Than $100,000 ( 11.7m+) per Year in EvaluatePharma finds that the median annual reimbursed cost per patient per year within newly reimbursed drugs in the period has increased to $837 ( 98k), from $697 ( 82k) in the period The shift to higher cost drugs partially reflects industry product launches of innovative drugs aimed at smaller patient population sizes. There were 10 drugs reimbursed which cost in excess of $100,000 ( 11.7m+) per year in the period , versus 5 in the period Count of Drugs Reimbursed Count of New Drugs in Japan by Cost per Patient per Year Price Band in vs Source: EvaluatePharma (9 MAR 2015) : Highest Cost per Patient Vpriv ( 50m/ $465k) Solaris ( 45m/ $383k) Byclot ( 38m/ $357k) Vyndaqel ( 21m/ $184k ) $100,000+ $50,000 - $100, $25,000 - $50, $10,000 - $25,000 $5,000 - $10,000 $1,000 - $5,000 $0 - $1,000 Reimbursed Cost per Patient per Year Banding ($) Count of New Drugs in Japan ( vs ) by Reimbursed Cost per Patient per Year Price Band Rate 1$ = 117 Reimbursed Cost per Year Banding Count % Split of New Products USA $ Yen Chg $100, m % 4% $50,000 - $100, m m % 2% $25,000 - $50, m m % 7% $10,000 - $25, m m % 10% $5,000 - $10, m m % 8% $1,000 - $5, m m % 17% $0 - $1,000 0m m % 52% % 100% $10, % 23% $0 - $10, % 77% Total Cost per Patient Analysis $ $ % Change Median Cost per Drug per Year 81,515 97,941 $697 $ % Average Cost per Drug per Year 1,511,454 1,756,063 $12,918 $15, % Methodology: The reimbursed cost per patient per year is based on the company disclosed analysis at the time of reimbursement. To improve analysis the Yen cost per patient is translated into dollars using the latest exchange rate ($1 = 117). 11

12 Reimbursed Cost per Patient vs. No. of Patients Treated (2014) Japan Reimbursed Cost per Patient vs. No. of Patients Treated (2014) New Cancer Treatments Giotrif & Zytiga Priced at Premium Versus Other Newly Reimbursed Drugs in 2014 EvaluatePharma finds that prostate cancer treatment Zytiga (J&J/ AZ) and Boehringer Ingelheim's lung cancer treatment Giotrif are among the products reimbursed in 2014 which are priced at a premium compared to all other drugs reimbursed in The analysis is based on a regression of reimbursed cost per patient per year against peak number of patients treated for drugs reimbursed in 2014 and reviewing outliers. The analysis does not take into account explicit innovation premiums awarded on reimbursement. The annual reimbursed cost per patient per year of all drugs in 2014 is moderately correlated to the number of patients treated (R2 = 0.59). Reimbursed Cost per Patient per year ($) 500, ,000 0, , , , , , ,000 50,000 0 Japan Reimbursed Drugs in 2014: Cost per Patient per Year vs. No. of Patients Treated Source: EvaluatePharma (9 MAR 2015) Zytiga (J&J/ AZ) Giotrif (BI) y = x R² = ,000 0, , ,000 1,000,000 1,200,000 1,0,000 Japan Forecast Peak Number of Patients Treated Note: In theory the products above the line of best fit should represent the best patient outcome, cost out of healthcare and improved patient economic activity relative to the competition, for the indications in which sales are achieved. Top 10 Japan Drugs by Reimbursed Cost per Patient per Year in 2014: Peak Sales & No. of Patients Treated Cost per Patient Cost per Patient Peak Sales No. of Product per Year ( ) per Year ($) ($m) Patients 1 Vpriv I.V. 0 Units 50,000,000 $465, Byclot 38,333,333 $356, Treprost Injection 20mg, 50mg, 100mg, 200mg 18,000,000 $167, Alecensa Capsule 20mg, mg 14,200,000 $132, ,500 5 Alprolix I.V. 500, 1000, 2000, ,107,143 $131, Deltyba Tablet 50mg 9,333,333 $86, Adcetris 50mg for Intravenous Drip Infusion 7,466,667 $72, Kadcyla I.V. infusion 100mg,160mg 6,538,462 $63, ,600 9 Opdivo I.V. 20mg, 100mg 6,595,745 $61, Jakavi Tablet 5mg 6,250,000 $58, ,600 12

13 Japan NHI Drug Price Revisions ( ): Total, Small Molecule & Biotech Japan Drug Price Revisions ( ): Total, Small Molecule & Biotech Japan Reimbursed Prices of Small Molecule Drugs (-5.2%) Falls Twice as Fast as Biologicals (-2.5%) in 2014 Revision EvaluatePharma finds that small molecule drugs got hit by an average 5.2% price cut compared to a 2.5% cut for biologicals in the last Japan price revision, effective 1st of April The difference is due to the reduced discounting on biotechnology products versus small molecule drugs and also the reduced impact of generics on biotechnology pricing vs. small molecule. Every two years, effective 1st April, the MHLW undertakes a price revision. The primary purpose of this revision is to reduce the gap between the reimbursement price and the actual price paid by purchasers (hospitals/ pharmacies). It is worth noting that, if actual sales exceed double the original forecasted peak, a product s price can be reduced by up to 25%. The overall revision in the 2014 price revision was -4.2% based on EvaluatePharma analysis. Japan NHI Drug Price Revisions : Average Percentage Revision Source: EvaluatePharma (9 MAR 2015) Percentage Drug Price Revision (%) 0% -1% -2% -3% -4% -5% -6% -7% Q Q Q Q % -3.5% -3.3% -4.2% -4.6% -4.8% -5.0% -5.2% -6.6% -6.2% -6.7% -7.2% Total Biotech Small Molecule -8% Japan NHI Drug Average Percentage Price Revisions ( ): Total, Small Molecule & Biotechnology Analysis Average Price Revision Q = Year Q Q Q Q % chg. Small Molecule Drugs -6.6% -7.2% -6.7% -5.2% % Biotechnology Drugs -3.5% -4.8% -3.3% -2.5% % Total -5.4% -6.3% -5.6% -4.5% % Japan NHI Drug Median Percentage Price Revisions ( ): Total, Small Molecule & Biotechnology Analysis Median Price Revision Q = Year Q Q Q Q % chg. Small Molecule Drugs -4.4% -6.5% -5.9% -3.4% % Biotechnology Drugs -3.5% -4.2% -4.0% -1.1% % Total -3.8% -5.4% -5.0% -2.3% % 13

14 Japan NHI Price Revisions ( ): Product Analysis Japan NHI Drug Price Revisions : Top 10 Product Analysis Prices of Top 10 Selling Japanese Drugs Declined 19% Over the Last Four NHI Price Revisions ( ) EvaluatePharma finds that the reimbursed drug prices for all of the top 10 selling products in Japan have decreased over the period , by on average 19%. The price of the drug Plavix decreased the least, with a 2% drop over the period 2008 to Prevacid had the largest decrease in reimbursed drug price with a reduction of 28%. In Q Remicade was hit by an 11% price reduction and in November 2014 Nippon Kayaku launched a biosimilar into the Japanese market. Percentage Drug Reimbursemend Price Revision (%) 4% 2% 0% -2% -4% -6% -8% -10% Japan Top 10 Selling Drugs: Reimbursed Price Revisions (%) Source: EvaluatePharma (9 MAR 2015) Prevacid Benicar Micardis Januvia Diovan Mohrus Tape Remicade Avastin Blopress Plavix Q Q Q Q % Japan Top 10 Selling Drugs in 2013: Percentage Reimbursed Price Revisions Average Price Revision Q = Product Q Q Q Q % chg. Note Prevacid -4.3% -8.6% -10.0% -8.4% % First generic launched MAY 05 Benicar -10.1% -7.9% -7.6% -5.1% % Micardis -10.1% -7.5% -8.0% -4.5% % Januvia 0.0% -3.4% -7.1% -10.1% % Diovan -4.2% -4.9% -6.5% -3.1% % First generic launched JUN 14 Mohrus Tape -10.1% -7.3% -6.6% -4.7% % Remicade -6.9% 0.0% 0.3% -10.9% % Biosimilar launched NOV 14 Avastin -0.6% 0.0% -8.8% 2.9% % Blopress -10.1% -7.2% -6.6% 0.0% % First generic launched SEP 14 Plavix -3.5% -1.2% -0.1% 2.8% % Average -6.0% -4.8% -6.1% -4.1% % Methodology: Reimbursed drug price revision reflects the average across all packs. 14

15 Price Comparison: Japan vs. Key International Markets Price Comparison: Japan vs Key International Markets Japan Reimbursed Drug Prices % Lower than USA; 20% Cheaper than Germany Japan Prices 28% Higher than UK and 11% Above France EvaluatePharma finds that the average median reimbursed drug price in Japan is % below the average reference price in the USA at launch, based on analysis of Japanese regulatory documents. Japan prices are also less than German reference prices by around 20%. Compared to the UK and France, reimbursed prices in Japan are 28% and 11% more expensive, respectively. Out of the top 5 reimbursed drugs with foreign comparators in 2014, USA prices were at least double that of the Japan prices. Median Japan vs. USA Price (USA=100) Median Japan vs. UK Price (UK=100) 180% 160% 1% Average Median Japan vs. USA Price: 60% 180% 160% 1% 120% 120% 100% 100% 80% 80% 60% 60% % 20% % 20% Average Median Japan vs. UK Price: 128% 0% 0% Year Exchange Rate ($- ) Year Exchange Rate ( - ) Median Japan vs. Germany Price (Germany=100) Median Japan vs. France Price (France=100) 180% 160% 1% Average Median Japan vs. Germany Price: 80% 180% 160% 1% Average Median Japan vs. France Price: 111% 120% 120% 100% 100% 80% 80% 60% 60% % % 20% 20% 0% 0% Year Exchange Rate ( - ) Year Exchange Rate ( - ) Top 5 Reimbursed Drugs in 2014 (Based on Peak Sales): Japan Reimbursed Unit Price vs. Foreign Comparators Japan vs. USA Japan vs. UK Japan vs. Germany Japan vs. France Product Unit Price: Jp ($) USA ($) (USA=100) UK ($) (UK=100) Ger ($) (Ger=100) Fr ($) (Fr=100) 1 Farxiga Tablets 10mg Canaglu Tablet 100mg Zalutia Tablets 5mg Effient Tablets 5mg Zytiga Tablet 250mg Average Methodology: Suglat excluded as no foreign price comparison available. 15

16 Japan Process for Pricing New Drugs Japan Process for Pricing New Drugs Overview of Methodology Used by Drug Pricing Organisation (DPO) to Price New Drugs in Japan There are two fundamental pricing methods for newly approved drugs in Japan: Cost Calculation and Similar Efficacy. Cost Calculation Method: Drugs perceived to be without a comparator in the Japan market are priced according to the sum of key costs related to drug production. The NHI price calculated as the sum of costs such as raw materials, labour, manufacturing, marketing, operating profit (average rate for major Japanese manufacturers plus/ minus a possible adjustment for innovation), distribution, and consumption tax. Similar Efficacy Method: Drugs which have a comparable drug on the market, as identified by the Ministry of Health, are priced in direct comparison to these dependent on treatment regimen and comparative innovation, usefulness, marketability, paediatric use and new kit available. Both groups are then subjected to potential change related to foreign price comparisons and any further necessary adjustments. Pricing Adjustments vs. Price Premiums A product is potentially eligible for a price premium if it can show significant benefits above current market alternative competitor products. Price premiums have been incorporated into the Japan Ministry of Health pricing structure since The awarding of premiums serves to promote innovation within the industry by increasing daily treatment cost. The awarded percentage is based on product performance against benchmark criteria as defined and judged by the Ministry. If no comparable product is identified by the Ministry then a new product is ineligible for a price premium. These products are priced according to the Cost Calculation Method. This structure also serves to promote further innovation within the industry by incorporating flexiblity for positive and negative percentage adjustments to standard average operating profits in relation to a new product's novelty, efficacy and safety. Pricing Methods for New Drugs 16

17 Distribution of New Drug Pricing Methods ( ) Distribution of New Drug Pricing Methods ( ) Cost Calculation Used in 21% of New Drug Package Reimbursements in 2014; Similar Efficacy Used in 79% EvaluatePharma finds that the distribution of new drug pricing methods remained steady in 2014 with 21% of drugs falling into the Cost Calculation Method and 79% into the Similar Efficacy Comparison Methods (76% Similar Efficacy Comparison Method I, 3% by Similar Efficacy Comparison Method II). Cost Calculation: Drugs without direct comparators within the Japanese market may also receive pricing boosts by way of novelty, efficacy & safety adjustments to operating profit rates in the Cost Calculation Method. In 2014, 29% of new drugs achieved positive price adjustments within this method of pricing. Similar Efficacy Comparison: Innovation is rewarded within the MHLW system wherein me-too drugs may gain various premiums dependent on innovation, usefulness, marketability, paediatric use or function as a new kit product. In 2014, 24% of new drugs achieved a positive premium within this method of pricing. Count of New Drug Pricing Methods & Distribution (%) ( ) Source: EvaluatePharma (9 MAR 2015) Count of Number of Drugs Reimbursed % 88% 90% 85% 85% 82% 8 81% 77% 79% 80% 1 75% 4 70% % % % % 23% 25% 21% 18% 19% 20% 15% 15% 12% 9% 10% % Year Cost Calculation Method Similar Efficacy Comparison Method (I) 100% Percentage Distribution of Pricing Method Similar Efficacy Comparison Method (II) Cost Calculation Method (%) Total Similar Efficacy Comparison Method (%) Counts of New Drug Pricing Methods & Premium/ Positive Adjustment ( ) Annual Count of Reimbursed Drug Packages Cost Calculation Method Adjustment Achieved Positive Adjustment Achieved % 0% 0% 30% 60% 38% 55% 19% 0% 29% Similar Efficacy Comparison Method (I) Similar Efficacy Comparison Method (II) Total Similar Efficacy Comparison Method Premium Achieved Premium Achieved % 19% 30% 31% 38% 12% 23% 13% 10% 24% Distribution of New Drug Pricing Methods (%) Percentage Distribution Cost Calculation Method (%) 15% 15% 23% 9% 18% 19% 25% 12% 21% Similar Efficacy Comparison Method (I) 83% 79% 66% 88% 81% 71% 71% 83% 76% Similar Efficacy Comparison Method (II) 2% 5% 11% 3% 1% 10% 5% 5% 3% Total Similar Efficacy Comparison Method (%) 85% 85% 77% 91% 82% 81% 75% 88% 79% 17

18 Cost Calculation Method & Price Adjustments Analysis ( ) Cost Calculation Method & Price Adjustments Analysis ( ) Opdivo Earns 60% Adjustment for Novelty, Efficacy and Safety in 2014 EvaluatePharma finds the MHLW awarded two of the highest recorded adjustments for novelty, efficacy and safety in Bristol-Myers Squibb/ Ono's melanoma treatment Opdivo, achieved a 60% boost on the standard operating profit rate and Otsuka a % hike on Deltyba, its new tuberculosis drug. Cost Calculation Adjustments: Innovation, efficacy and safety in new drugs is accounted for in adjustments of the standard operating profit rate. This rate being derived from the average taken over the previous 3 years, sourced from the Handbook of Industrial Financial Data (Development Bank of Japan). The Opdivo adjustment is the largest percentage adjustment awarded by the MHLW (previously (typical adjustments typical adjustments range from have ranged -50% to between +100%), ±50% however ), however 2014 had 2014 a lower had a standard lower standard average average operating operating profit rate, profit at 16.9% rate, at versus 16.9% 19.2% versus in 19.2% recent in years. recent years. The chart The demonstrates chart demonstrates how Opdivo's how Opdivo's final operating final operating profit rate profit compares rate is similar to previous to previous awards. awards. Case Study example: Opdivo I.V. 100mg Cost Calculation Method Production costs: 459,778 Distribution costs: + 45,953 Consumption tax: + 54,063 Std. Av. Operating Profit Rate: 16.9% Adjustment (%): 60% Final Profit Rate: 27.0% Operating Costs: + 170,055 Total Price: 729,849 Top 5 Largest Adjustments Cost Calculation Method: Novelty, Efficacy and Safety (%) Brand Name Company Opdivo I.V. 20mg Ono Pharmaceutical Opdivo I.V. 100mg Halaven Intravenous Injection 1mg Deltyba Tablet 50mg Recomodulin Intravenous Ono Pharmaceutical Reimbursement Date Pricing Comment 02/09/2014 Standard Operating Profit Rate 160% 02/09/2014 Standard Operating Profit Rate 160% Eisai 19/07/2011 Standard Operating Profit Rate 1% Otsuka Pharmaceutical Asahi Kasei Pharma Top 5 Largest Adjustments: Novelty, Efficacy and Safety (%) Top 5 Largest Adjustments: Source: EvaluatePharma Novelty, Efficacy (9 MAR and 2015) Safety (%) (%) Source: EvaluatePharma (2 MAR 2015) (%) Opdivo I.V. 20mg Opdivo I.V. 100mg Brand Name Halaven Intravenous Injection 1mg Opdivo I.V. 20mg Deltyba Opdivo Tablet I.V. 100mg 50mg Halaven Intravenous Injection 1mg Recomodulin Intravenous Infusion Deltyba Tablet 50mg Pirespa Tablet 200mg Recomodulin Intravenous Infusion Samsca Tablet 15mg /09/2014 Standard Operating Profit Rate 1% 18/04/2008 Standard Operating Profit Rate 130% Standard Av. Operating Profit Rate (%) 60 Adjustment: Novelty, Efficacy and Safety (%) Final Operating Profit rate (%) NHI Price ( ) , , , , , Adjustment: Novelty, Efficacy and Safety (%) Final Operating Profit rate (%) 18

19 Deltyba Opdivo Tablet I.V. 100mg 50mg Halaven Intravenous Injection 1mg 30 Recomodulin Intravenous Infusion Deltyba Tablet 50mg Cost Calculation Method & Price Pirespa Tablet 200mg 30 Adjustment: Novelty, Efficacy and Safety Recomodulin Intravenous Infusion Adjustments Analysis ( ) Cont. (%) 30 Samsca Tablet 15mg Final Operating Profit rate (%) 25.0 Top 5 Largest Adjustments Cost Calculation Method: Novelty, Efficacy and Safety (%) Brand Name Company Opdivo I.V. 20mg Ono Pharmaceutical Opdivo I.V. 100mg Halaven Intravenous Injection 1mg Deltyba Tablet 50mg Recomodulin Intravenous Infusion Pirespa Tablet 200mg Samsca Tablet 15mg Ono Pharmaceutical Reimbursement Date Pricing Comment 02/09/2014 Standard Operating Profit Rate 160% 02/09/2014 Standard Operating Profit Rate 160% Eisai 19/07/2011 Standard Operating Profit Rate 1% Otsuka Pharmaceutical Asahi Kasei Pharma 02/09/2014 Standard Operating Profit Rate 1% 18/04/2008 Standard Operating Profit Rate 130% Shionogi 12/12/2008 Standard Operating Profit Rate 130% Otsuka Pharmaceutical 10/12/2010 Standard Operating Profit Rate 130% Standard Av. Operating Profit Rate (%) Adjustment: Novelty, Efficacy and Safety (%) Final Operating Profit rate (%) NHI Price ( ) , , , , , ,

20 Similar Efficacy Comparison Method Price Premiums ( ) Similar Efficacy Comparison Method Price Premiums ( ) Daklinza Achieves Highest Price Premium in 2014 of % EvaluatePharma investigation into NHI pricing data can reveal the highest premium for a similar drug in 2014 was %, to Bristol- Myers for the Hepatitis C NS5A inhibitor Daklinza Tablet 60mg. Daklinza is priced by Similar Efficacy Comparison. Access to original NHI price reimbursement documents indicates Soburiado/ Sovriad/ Olysio (Johnson & Johnson) is the MHLW comparator product. Through this comparison, a Premium for Usefulness (I) of % indicates that Daklinza meets two of the three MHLW criteria that: - the drug has a new clinically useful mechanism of action - there is evidence of greater efficacy and safety - the drug improves treatment of indicated diseases and injuries. Premiums for Usefulness (I) can Range From 35% - 60% If, after premiums have been given (for the similar efficacy comparison (I) method), the calculated price is 1.25 times higher or 0.75 times lower than the average foreign price (mean of USA, UK, German and French prices), the calculated price may be adjusted further. Case Study example: Daklinza Tablet 60mg Similar Efficacy Comparison (I) Pricing Calculation Identified comparator product: New Product: Olysio Daklinza Treatment regimen: Treatment regimen: 1 Tablet per day, 12-week course. 1 Tablet per day, 24-week course Dose/ Formulation: Dose/ Formulation: 100mg Tablet 60mg Tablet Price: Premium: 13, % for Usefulness (I) Reimbursement price: 6,561. (as treatment course is double that of Olysio) 6, % = 9,185. Top 5 Similar Efficacy Pricing Premiums Attained (%) Source: EvaluatePharma (9 MAR 2015) Adjustment: Price Premium (%) Isentress Tablet 0mg Imusera Capsule 0.5mg Gilenya Capsule 0.5mg Macugen Intravitreal Injection kit 0.3mg 45 Telavic Tablet 250mg Daklinza Tablet 60mg Top 5 Similar Efficacy Pricing Premiums Attained (%) Brand Name Isentress Tablet 0mg Imusera Capsule 0.5mg Gilenya Capsule 0.5mg Macugen Intravitreal Injection kit 0.3mg Telavic Tablet 250mg Daklinza Tablet 60mg Company Banyu Pharmaceutical Mitsubishi Tanabe Pharma Foreign Comparator Date Pricing Comment YES 13/06/2008 Premium for Usefulness (I) (A=%); Marketability based Calculation (I) (A=10%); Upward adjustment based on average foreign price YES 25/11/2011 Premium for Usefulness (I) (A=%); Premium for Marketability (I) (A=10%) Novartis Pharma YES 25/11/2011 Premium for Usefulness (I) (A=%); Premium for Marketability (I) (A=10%) Pfizer Japan YES 12/09/2008 Premium for Usefulness (I) (A=35%); Premium for marketability (A=10%) Adj.Price Adjustment: Premium (%) Foreign Price NHI Price ( ) 50 Upward adjustment 1,510 based on average foreign price 50-8, , ,457 Mitsubishi Tanabe NO 25/11/2011 Premium for Usefulness (I) (A=%) - 1,422 Pharma Bristol-Myers NO 02/09/2014 Premium for Usefulness (I) (A=%) - 9,186 20

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